Monday, August 24, 2009

Louis Navellier and IDCC

Another impressing trade was executed by the icon of growth investing in just one week.

Louis Navellier on August 10th 2009 decided it was time to buy this overvalued stock: IDCC. It had a P/E ratio of over 45 that day.

Here is what Mr. navellier was writing on August 10th 2009:

For over three decades, InterDigital (IDCC) has invented and developed advanced digital wireless technology. Its circuitry designs and software can be found in every digital cell phone today and licensed all over the world by leading brands like LG Electronics, NEC, Siemens and Sony Ericsson. Approximately 80% of the company’s sales are from its Asian customers. InterDigital holds over 3,000 U.S. and foreign issued patents combined, with an additional 9,000 patent application in process—a great sign of future revenue streams.
In the second quarter, IDCC’s earnings rose 353.8% to $26.4 million, or 59 cents per share, compared with $5.9 million or 13 cents per share in the same quarter a year ago. During the same period, the company’s sales rose 27.6% to $74.9 million compared with $58.7 million. The technology sector has been gaining momentum in recent weeks thanks to solid earnings reports from some of its key players. IDCC is no exception—the stock is a good buy.

Buy below: $32.82

Close Price: $30.92

One week later (August 17th 2009):

InterDigital Inc. (IDCC) was stopped out today after a U.S. International Trade Commission judge ruled in favor of cell-phone maker Nokia in a patent infringement case brought by IDCC. Two years ago, InterDigital alleged that Nokia had engaged in unfair trade practices by selling certain 3G technology handsets for importation into the U.S. that violated four of IDCC’s patents. While I expect the company to appeal the ruling, the risk of owning this stock outweighs the reward. IDCC is also an excellent example of why stop losses are such an important part of our strategy here at Quantum Growth. Stop-loss prices do exactly what the name implies—protect us against severe losses. One of my top priorities at Quantum is to keep our risk level low. If a stock falls sharply for whatever reason—say, an unfavorable court ruling—a stop-loss strategy helps us leave the stock quickly without taking big losses.

Close Price: $22.52

A remarkable 27% loss in one week.

1 comment:

Anonymous said...

For Louis, a 27% loss really isn't a big loss. You should see the big ones!